The World Bank Group has committed $3 billion in energy efficiency initiatives in the Europe and Central Asia region, presenting an opportunity to increase energy supplies, improve energy security, reduce CO2 emissions, and forestall a looming energy crisis.Read More »

WASHINGTON, January 7, 2015 – Gains from low oil prices can be substantial for developing-country importers if supported by stronger global growth, says a World Bank Group analysis of the oil price... Show More + decline, contained in the latest edition of Global Economic Prospects.The decline in oil prices reflects a confluence of factors, including several years of upward surprises in oil supply and downward surprises in demand, receding geopolitical risks in some areas of the world, a significant change in policy objectives of the Organization of the Petroleum Exporting Countries (OPEC), and appreciation of the U.S. dollar. Although the relative strength of the forces driving the recent plunge in prices remains uncertain, supply related factors appear to have played a dominant role.Soft oil prices are expected to persist in 2015 and will be accompanied by significant real income shifts from oil-exporting to oil-importing countries. For many oil-importing countries, lower prices contribute to growth and reduce inflationary, external, and fiscal pressures.However, weak oil prices present significant challenges for major oil-exporting countries, which will be adversely impacted by weakening growth prospects, and fiscal and external positions. If lower oil prices persist, they could also undermine investment in new exploration or development. This would especially put at risk investment in some low-income countries, or in unconventional sources such as shale oil, tar sands, and deep sea oil fields.“For policymakers in oil-importing developing countries, the fall in oil prices provides a window of opportunity to undertake fiscal policy and structural reforms as well as fund social programs. In oil-exporting countries, the sharp decline in oil prices is a reminder of significant vulnerabilities inherent in highly concentrated economic activity and the necessity to reinvigorate efforts to diversify over the medium and long term,” said Ayhan Kose, Director of Development Prospects at the World Bank.The analysis on oil prices in Global Economic Prospects is complemented by two special features on how trends in global trade and remittance flows are impacting developing countries.Global trade weak on cyclical and long-term factorsGlobal trade expanded by less than 3.5 percent in 2012 and 2013, well below the pre-crisis average annual rate of 7 percent, holding back developing country growth in recent years.Weak demand, mainly in investment but also in consumer demand, is one of the main causes of the deceleration in trade growth. With high-income countries accounting for some 65 percent of global imports, the lingering weakness of their economies five years after the crisis suggests that weak demand continues to adversely impact the recovery in global trade. However, long-term trends have also slowed trade growth, including the changing relationship between trade and income. Specifically, world trade has become less responsive to changes in global income because of slower expansions of global supply chains and a shift in demand from trade-intensive investment to less trade-intensive private and public consumption.The analysis finds that these long-term factors affecting trade will also shape the behavior of trade flows in the years ahead—in particular, that the expected recovery in global growth is not likely to be accompanied by the rapid growth in trade flows observed in the pre-crisis years.Remittances have potential to smooth consumptionA second special feature reports that remittance flows to many low- and middle-income countries are not only significant relative to GDP but also comparable in value to foreign direct investment (FDI) and foreign aid. Since 2000, remittances to developing countries have averaged about 60 percent of the volume of total foreign direct investment flows. For many developing countries, remittances are the single largest source of foreign exchange.The study finds that, in addition to their considerable volume, remittances are more stable than other types of capital flows, even during episodes of financial stress. For example, during past sudden stops, when capital flows fell on average by 14.8 percent, remittances increased by 6.6 percent. The stable nature of remittance flows, the analysis concludes, means that they can help smooth consumption in developing countries, which often experience macroeconomic volatility. Show Less -

WASHINGTON, January 7, 2015 – Faced with weaker export prospects, an impending rise in global interest rates, and fragile financial market sentiment, developing countries need to rebuild fiscal buffers... Show More + to support economic activity in case of a growth slowdown, says the new edition of Global Economic Prospects, released today by the World Bank Group. For many developing economies, lower oil prices have provided a timely opportunity for doing so.In countries with elevated domestic debt or inflation, monetary policy options to deal with a potential slowdown are constrained. In the foreseeable future, these countries may need to employ fiscal stimulus measures to support growth. But many developing countries have less fiscal space now than they did prior to 2008, having used fiscal stimulus during the global financial crisis. And in recent years, private debt levels have risen substantially in some developing countries.A key finding from the analysis in the report is that in countries where debt and deficits have widened from pre-crisis levels, each fiscal dollar spent on activities designed to boost consumption and national income will have roughly a third less impact than it did in the run-up to the global financial crisis. Because the so-called fiscal multiplier effect is weaker now for many developing countries, they need to rebuild budgets in the medium-term, at a pace determined to country-specific conditions. For a number of oil-importing countries, lower oil prices offer a chance to improve fiscal positions more quickly than might have been possible before mid-2014.“With oil likely to remain cheap for some time, oil-importing countries should lower or even eliminate fuel subsidies and rebuild the fiscal space needed to carry out future stimulus efforts. On the policy front, both the size and the quality of fiscal deficits matter, as do spending decisions. Emerging market economies would do well to invest in infrastructure and support social schemes vital to poverty reduction. Such policies can raise future productivity and reduce the fiscal deficit in the long run,” said Kaushik Basu, Senior Vice President and Chief Economist at the World Bank. "This year’s Global Economic Prospects now goes beyond prediction and deepens our understanding of our global economic predicament."The report documents how well-designed and credible institutional mechanisms—such as fiscal rules, stabilization funds, and medium-term expenditure frameworks—are instrumental in fostering growth and restoring depleted fiscal buffers.“The rebuilding of fiscal buffers will provide the room required to support activity during times of economic stress. The need for additional fiscal buffers is more pronounced now in an environment of uncertain growth prospects, limited policy options, and likely tighter global financial conditions,” said Ayhan Kose, Director of Development Prospects at the World Bank. Show Less -

The Energy Sector Development Policy
Operation for Kyrgyz is requesting financing to improve the
financial viability of the energy sector, enhance its
governance and... Show More + accountability while managing the impact of
power shortages on poor regions. Accordingly, the proposed
operation supports government efforts in the following three
areas: 1. Improving financial viability of the sector; 2.
Enhancing sector governance, transparency and
accountability; and 3. Managing the impact of power
shortages on poor regions. The program is at the core of the
national Power Sector Development Strategy 2012-2017 and is
fully aligned with the objectives of the Country Partnership
Strategy for 2013-2017 and the World Banks objective to
reduce poverty and promote shared prosperity. The proposed
operation incorporates the following key lessons: (i)
support complex and politically difficult reforms through a
dedicated sector DPO; (ii) concentrate on few policy areas
that are fundamental for addressing sector key challenges
and have full ownership of the Government; and (iii)
complement the DPO with other instruments for Bank support,
including investment project financing, technical assistance
and economic and sector work.Show Less -

Ankara, December 23, 2014— A weak Q3 GDP print means end-year growth is likely to come in just above 3 percent. However the disappointing headline number is mainly due to a reduction in inventories with... Show More + other components of domestic demand signaling improvements, according to the World Bank’s Turkey Regular Economic Brief[i] No: 5- issued today in Ankara. Moreover, the outlook for inflation and the current account has improved substantially due to a sharp decline in oil prices. The World Bank’s 2015 growth projection remains unchanged at 3.5 percent.“Thanks to lower oil prices, Turkey will achieve significant external rebalancing in 2015 with the current account projected at 4.5 percent of GDP and inflation coming down to 6.7 percent.” said Senior Economist Kamer Karakurum Özdemir. However, the brief cautions that renewed weakness in the currency shows, once again, that Turkey is vulnerable to a change in investor sentiment and that the room for monetary policy maneuver is consequently limited. While private consumption is expected to return to being the main driver of growth, political uncertainty and the volatility in global markets will continue to weigh on investor sentiment.Country Director for Turkey Martin Raiser stated: “Turkey’s growth prospects beyond 2015 depend on the recovery of private investment and a resumption of productivity growth. For this, a signal of the Government’s commitment to a level playing field for all investors is needed. The new 25 Transformation Programs provide such an opportunity, but moving beyond announcements to implementation will be critical.”Against this background, the World Bank in 2014 has supported projects to enhance Turkey’s competitiveness including a Development Policy Loan supporting key reforms in capital and labor markets; additional financing to BOTAŞ for the completion of the Tuz Gölü Gas Storage Facility; and further financial support for Turkish SMEs focused on innovative instruments such as Islamic financing and factoring.The World Bank’s work in Turkey is based on a joint Country Partnership Strategy (CPS) for the period of 2012-2016. The CPS aims to support Turkey’s transition to high income with financing of up to US$ 6.45 billion during the five year period, as well as with policy analysis and advisory services. Key objectives include enhanced competitiveness and employment, improved equity and public services and deepened sustainable development. The World Bank’s partnership with Turkey is evolving to include the sharing of knowledge and experience with a wider international audience.-----------------------------------------[i] Turkey Regular Economic Brief is a two pager brief assessing current developments in the Turkish macro economy and provides World Bank quarterly forecasts on key macroeconomic variables, linking these to underlying trends in structural reforms. Show Less -

US $378.4 million new loan for transmission system upgrades and electricity market reformsWASHINGTON, December 22, 2014 – The World Bank’s Board of Executive Directors today approved a US$378.425 million... Show More + loan for the Second Power Transmission Project to improve the reliability of the power transmission system and support the implementation of the Wholesale Electricity Market in Ukraine. With this new project, the Bank is stepping up its support for the country’s energy sector reforms. “We are delighted to deepen our support for Ukraine’s large power sector, which has strategic importance for the country,” said Qimiao Fan, World Bank Country Director for Belarus, Moldova, and Ukraine. “This investment will help rehabilitate the national power transmission network to improve Ukraine’s energy security and mitigate the impact of climate change.”The new investment will support efforts to develop plans for renewable power integration, applying smart grid solutions at power transmission. It will also support the implementation of the Wholesale Electricity Market and Balancing Market mechanisms and enhance electricity market competitiveness by aligning the Ukrainian network with the European Network of Transmission System Operators for Electricity. This will help to strengthen not only national, but also regional energy security. The new project will help the national energy company Ukrenergo to design and implement high-priority transmission system rehabilitation measures and upgrades, increasing the system’s reliability. It aims to make substations more efficient through reducing the number of outages, while strengthening electricity market performance. This will be done across the Central and Northern power systems, the country’s two major regional networks, covering almost one-third of Ukrainians who will get more stable electricity supplies.The project includes a US$48.425 million loan provided by the Clean Technology Fund (CTF), which will be used to assist Ukrenergo in the design and installation of the next generation of modern communications, grid management, and control systems, which will enable large-scale integration of wind and solar energy resources and improve management and operation of the transmission network.In addition, the project provides US$2.5 million of institutional support to Ukraine’s Ministry of Energy and Coal Industry for the implementation of energy sector reforms in line with its commitments within the Energy Community and the EU Association Agreement.This new project is part of the World Bank Group’s overall assistance to Ukraine announced in March this year. The Bank Group has pledged up to US$3.5 billion of new lending for Ukraine in 2014, of which over US$2.5 billion has already been provided.The World Bank is a major development partner of Ukraine. With this new investment, the World Bank’s active lending portfolio will amount to about US$4.6 billion, through 14 operations in the country. Since Ukraine joined the World Bank in 1992, the Bank’s commitments to the country have totaled over US$9 billion for 45 projects and programs.Background NoteUkraine, with the support of the World Bank, has been implementing energy sector reforms since 2004. The main objectives of these reforms are to: provide investments for energy infrastructure; improve the safety and reliability of the power supply; contribute to the uninterrupted operation of the Ukrainian energy market; and support Ukraine in its legislative, institutional, and technical harmonization of the energy sector with the European Union’s (EU) Internal Energy Market. The Second Power Transmission Project, or PTP2, contributes to providing a strategic framework for the development of Ukraine’s power sector in a sustainable manner. Show Less -

ISTANBUL, December 10, 2014—Steady growth over the past decades has brought Turkey to the threshold of becoming a high-income economy, prosperity has been broadly shared across income groups in the society,... Show More + and the size of the middle-class was doubled, according to a new World Bank report, Turkey’s Transitions: Integration, Inclusion, Institutions. However, challenges remain. The report examines Turkey’s experience in the transition from a lower middle-income to an upper middle-income economy, and looks at what has worked well and what needs to change.On the occasion of today’s report launch, Laura Tuck, World Bank Vice-President for Europe and Central Asia, stated: "The rise of emerging markets is changing the global development landscape. For many developing countries, the most pertinent lessons in development come, not from the industrialized countries of Western Europe and North America, but from the dynamic emerging market economies that are well on their way towards high income status.” Turkey’s GrowthTurkey’s average annual GDP growth rate was 4.5 percent between 1960 and 2012. The share of Turkey’s middle-class increased from 18 percent to 41 percent of the population between 1993 and 2010.The income of the bottom 40 percent of Turkey’s population has increased almost at the same rate as the rate of total population growth, indicating that prosperity has been broadly shared across income groups of the society.Tuck added that, “As a reflection of the growing role of emerging markets in the global economy, there is increased interest in the exchange of experiences among policy makers of developing countries with their peers facing similar challenges. Indeed, with a per capita income of around US$10,500, Turkey is just a few years away from crossing the threshold of becoming a high-income economy, if past growth rates are sustained. According to the OECD, by 2060 Turkey will be the 12th largest economy in the world. Turkey’s economic rise has attracted attention, and this book is an account of how this success was achieved and what lessons other countries can learn from it.”The report finds that two central themes have dominated Turkey’s economic development over the past three decades: integration and inclusion.According to the report, Turkey’s economic integration – both in terms of the country’s integration into global markets and among advanced and the integration of underdeveloped regions in Turkey’s economy – has been a driver for economic progress. Moreover, Turkey used the opportunity of deep financial crisis over a decade ago to reform its banks and its public finances – allowing public expenditure to move from debt service to public service. In addition, economic progress has been socially inclusive as poverty has been reduced by more than half, and access to high-quality health, education, and municipal services has expanded.And yet, in spite of its remarkable achievements so far, Turkey has yet to establish the institutional prerequisites of a high-income economy. In a less forgiving global economic context, the risk of the so-called “middle-income trap” looms for countries that let off on their reform efforts. For Turkey to complete the transition to a high-income economy, improvements in the rule of law, in public accountability and transparency, and in the climate for entrepreneurship and innovation will be needed. Martin Raiser, World Bank Country Director for Turkey and primary author of the report, said, “Turkey is undergoing multiple transitions en route to a high-income economy, some more advanced than others. We hope Turkey’s experience inspires policy makers in other emerging markets to aim for high-income status. And we hope that by drawing up a balance sheet of Turkey’s achievements and challenges, this book will also inspire Turkey’s policy makers to redouble their own reform efforts and lift their country into the ranks of advanced high-income economies. That would make the lessons from Turkey’s development experience all the more convincing for other countries.” Show Less -

The lower-case scenario assumes an average oil price of US$70 per barrel in 2015 and US$72 per barrel in 2016. In this scenario, the Russian economy is projected to contract by 1.5 percent in 2015, before... Show More + expanding mildly by 0.3 percent in 2016. Investment would contract by more than under the baseline scenario.“The key driver of the additional contraction in the lower-case scenario is a more pronounced decline in consumption in both 2015 and 2016. A shrinking economy and declining real wages could, result in a vicious circle for consumption,” said Birgit Hansl.The uppercase scenario assumes an average oil price of US$85 per barrel for 2015 and US$90 per barrel for 2016. At these prices, the Russian economy is expected to avoid a recession in 2015 and to achieve an expansion of 0.5 percent in 2016. As in the other two scenarios, net exports are expected to be the main contributor to growth, replacing consumption growth, which is likely to come to a standstill. Investment is still expected to decline, though by less than in the other two scenarios, due to restricted access to external capital and high borrowing costs. In 2016, investment and consumption growth would start their gradual recovery and begin to contribute positively to growth. Show Less -